Future Shop

By Brian Robinson

Aug 09, 1998

If desktop information technology is becoming a commodity, then there's one golden rule: The more you buy, the less expensive it gets. Individual states are finding that out by combining agency procurements. Now Massachusetts wants to take it a giant step further by combining the purchasing power of multiple states in a national cybermall.

It's more than just a wish. Massachusetts is already deep into the design of just such a cybermall for its own state agencies and local governments, but at the same time it's putting out feelers to other states to gauge interest levels. It plans to have a pilot of the cybermall running this fall that will include South Dakota, Texas, Utah and Washington. If the concept proves itself, the cybermall will be opened to as many states and other government entities as want to join.

Accessible to All

The cybermall would then be a system that would reside on a server-probably in Massachusetts-but which would be accessible to any participant via the Internet. The key to the whole enterprise is that the government members of the cybermall would present themselves as a single entity to vendors and suppliers, who would link their electronic catalogs into the cybermall as product and service "storefronts." The resulting huge-volume purchasing power would then drive down prices for everyone involved.

"The technology side of this will be relatively simple," said Gary Lambert, Massachusetts' deputy state purchasing officer. "Many vendors already have a significant investment in infrastructure for such things as catalogs and already have substantial involvement in malls elsewhere. The difficult stuff will [be] in the state-to-state agreements and supplier relationships that need to be struck with the vendors."

The first step, Lambert said, is to work out the physical organization of the cybermall. Design work for what will be presented on screen as the visual representation has been in process, as has the research and development to produce a functional model of the enterprise. That should soon result in something "that will allow us to kick the tires, see if we like what is there or not and get us to where we can start discussing details of the logic flow, etc.," Lambert said.

The next part of the process entails the states that are involved in the cybermall. They need to approach vendors to formulate an approach to prices and terms that could be applied to all states. At least initially, the cybermall will be open only to those vendors and suppliers who already have statewide contracts with various states. The intention would be to discover if those terms that were particularly favorable to, say, Texas could also be applied to all the other states participating in the cybermall, "with the knowledge that we have to apply reasonable attention to regionalization and what the requirements of that might be," Lambert said.

"It's interesting because what we often don't do now is cross state lines to aggregate purchasing power within a multitude of states," said David Gragan, the director for Texas' Central Procurement Services Division. "I would think it would be particularly applicable to desktop IT because these really are commodities these days, and [they] are common-use items. They are simple-not complex-purchases, and we've already come a long way in dealing with them."

He saw potential problems with conflicting rules among states on how they do their purchasing, but he also expressed confidence that these conflicts could be worked out, "especially if it is shown that the aggregate buying power really can reduce costs." Conflicts also probably could be worked out at the regulatory level, he said, obviating the need for possible cumbersome and drawn-out legislative remedies.

An Attractive Idea

Pat Kohler, procurement director for the state of Washington, sees the cybermall as "a very attractive idea. There is already some cooperative purchasing among states that takes advantage of volume purchasing, and this takes that even further."

It also has the advantage of leveraging technology and expertise that's already fairly common, she said. Access to the Internet is widespread, and many vendors have already signed on to the trend of offering products to states through catalogs and offering discounts off those catalogs rather than bidding separate items.

Sorting out the rules and regulations could be a limiting factor in creating a national cybermall, Kohler said, but in concept she saw the cybermall as "well-attuned to the purchasing of commodities as well as for such things as maintenance and operations services."

What will take the cybermall beyond a simple collection of vendor catalogs, however, is its extension into electronic commerce. That, in turn, will also put a demand on the intricacies of the agreements that will have to be struck before the cybermall can become real.

"From our side of the coin, we intend that a purchase made through the cybermall will result in a legally binding contract and will become an encumbrance in the state accounting system," said William Kilmartin, Massachusetts' comptroller. "So we will require the full range of security, identification, authorities, nonrepudiation, etc."

For now, Kilmartin thinks that will be accomplished through electronic data interchange standards. Massachusetts uses EDI to a limited extent for some of its procurements, but it's done through a closed system that involves a relatively small number of vendors and works with a value-added network. The cybermall will require more open standards that can be applied to the Internet.

One possibility, Lambert said, is the Open Buying off the Internet (OBI) standards, which were created by American Express. OBI uses EDI transactions sets, but they are applied in a different way than in traditional EDI.

As envisioned, Kilmartin said the cybermall would consist of a multiple-state network and specific state requirements on the back end that are linked to the public ledger. For the cross-state involvement, there needs to be-at least initially-full reciprocity of purchasing laws between the states that are involved in the cybermall.

Each of the states in the pilot is in negotiations with vendors who will participate from the suppliers' side. Massachusetts has confirmed that a scientific and medical supply vendor will be one of the participants and is in discussions with computer hardware and software resellers as well as office supply companies to take part as other vendor participants. Lambert said he thinks there will be a pool of eight to 15 vendors to choose from and about 10 vendors will participate in the pilot.

After the pilot, which will be fully functional "from the desktop to the storefront and back, together with some of the back-end process," Kilmartin expects the results will be evaluated and then a decision will be made on whether and when to go with a larger venture.

One way or the other, Massachusetts will go forward with the cybermall, if only for its own use. But the expectation is that the potential benefits eventually will drive other states to join.

"We just think the [return on investment] for this could be so huge," Kilmartin said.

Robinson is a free-lance writer based in Portland, Ore. He can be reached at hullite@mindspring.com.